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The American's Creed

I believe in the United States of America as a government of the people, by the people, for the people; whose just powers are derived from the consent of the governed; a democracy in a republic; a sovereign nation of many sovereign states; a perfect union, one and inseparable; established upon those principles of freedom, equality, justice, and humanity for which American patriots sacrificed their lives and fortunes.

I therefore believe it is my duty to my country to love it; to support its constitution; to obey its laws; to respect its flag; and to defend it against all enemies.

What percentage of your monthly net income goes to pay your monthly rent or mortgage payment?

Be sure to include property taxes, insurance, and PMI. I also would include any home-equity loan payments.

I just ran our numbers and it came to 16%. WOO HOO! My wife and I have been “talking” about moving into a nicer house. I’m not that excited about it. My fear is that we would buy too much house and pay too much and put ourselves in a bind. We did that when we bought this house and I don’t want to ever go through that again.

50 Responses to “What Percentage of Your Income Goes to Pay Your Rent or Mortgage Payment?”

Heh. I just computed this last night for an entry I’m posting tomorrow. Not counting web income, we’re paying just under 20%. Counting web income (which is a new reality in our world), we’re at just over 16%. Keeping this ratio low goes a *long* way to allowing financial peace-of-mind.

With everything included, our housing runs about 37% of our monthly gross income. (Blog income definitely helps keep that number below the menacing 40% mark.) This percentage is probably very low for my area considering the ridiculous price jumps in recent years.

Our PITI is at 18% of our net income, which is pretty low compared to the norms of roughly 1/3 of income going toward housing. Which makes me nervous to think about how our financial picture would look if our percentage were at the norm – we feel stretched as it is, even at our low percentage.

My income is highly variable and derived from multiple sources (i.e. salary, bonus, rental income, etc.), which makes this calculation very difficult to normalize. But this year, housing costs (mortgage, insurance, taxes) as a percentage of gross before-tax income would be 4.8%. So, as you can see, even if I suffered a 50% drop in income, my housing costs (after rental income) would be no more than 10% of income. Needless to say, in NYC, a place where most people spend upwards of 50% of gross income on housing, this provides considerable financial flexibility.

We moved from the other side of the country where that (owned) home was 16.9% of our net income. Now it’s an investment property, but we will look to move back at some point. Hopefully it will be even lower at that time.

My income is highly variable because the bulk of my money comes from commission. However, for the past few months, 23.6% of our income goes toward our mortgage, insurance, and property tax. That includes salary and commission. If I only count monthly salary, we pay 78% of our monthly salary. As you can see, it’s very important for us to budget commission checks so that we can live comfortably here in San Francisco.

For Greenwich, CT it’s 29.7% of net. I calculated net without taking into account deductions for health insurance, dependent care, 401K and flex spending. We live in a small house compared to the Jones’ but we can’t afford to upgrade because property values have skyrocketed and income hasn’t kept pace. Ah.. the joys of living close to Wall Street.

I live in the UK, where housing is considered expensive (lots of people on a smallish island) so I think I’m doing pretty well. This includes council tax (tax on living in a property so renters have to pay) and contents insurance (biuldings insurance covered by landlord).

I’m hoping to buy in the near future, and then I’ll be at 39% net and 28% gross.

around 31-32% of gross, closer to 40% net. one mortgage, no PMI, inclusive of taxes and homeowner’s insurance. Without insurance, it’s probably down 1-2%. I made more when I bought my house, then quit my well-paying job so it’s taking up more of my income though.

I own my home in Fayetteville, Arkansas. My family of five ( myself, wife, and 3 children) is a single income family. We do OK only because we have zero debt outside our mortgage. I took a +25% (gross) pay cut two years ago to leave a high stress job at a large publicly traded company for a job I enjoy at a state university with loads of benefits. I know several people who dream of doing the same thing but have to much debt to make less money. There are always costs associated with high debt.

About 15% of gross in San Diego (bought house in 1999 fortunately). If I was still in my 20’s, I’d think long and hard before deciding to live between San Diego and Seattle on the West Coast or between DC and Boston on the east coast. Sure you make more, but you pay a lot for quality of life. I don’t buy into the idea that home equity is an investment; its a place to live and a lifestyle choice.

P.S. Not everyone “chooses” where to live–some of us have to go where the job is. Hence home equity is not always just a lifestyle choice. If I had a viable choice I’d go where it’s much, much cheaper to live. (i.e., not Rhode Island)